CABLEVISION PARING DOWN

Cabler may sell systems to seed Garden coffer

NEW YORK — Cablevision Systems Corp., negotiating to buy ITT Corp. out of Madison Square Garden, is weighing the sale of cable systems in order to raise close to $1 billion.

Cablevision execs told Wall Street analysts Wednesday it may sell systems covering about 475,000 subscribers — just over 15% of its total subscriber count of 2.8 million. The systems would be outside of the cabler’s main clusters of New York, Cleveland and Boston, it told analysts. News of the sale pushed Cablevision’s stock price up 62¢ to $34.62.

Word of Cablevision’s plans came as the cabler confirmed in a press statement that it has “the intent, right and ability” to buy ITT out of Madison Square Garden if the conglomerate chooses to sell, which is expected as a result of Hilton Hotel Corp’s takeover bid for ITT. Cablevision already owns 50% of the Garden, which in turn owns MSG cable network as well as the Knicks and Rangers sports teams, and it has a right of first refusal on ITT’s half.

But Cablevision is heavily in debt already, with about $5 billion in bank borrowings and preferred stock, roughly equivalent to eight and a half times annual cash flow — compared to most media companies, whose debt is five times cash flow or lower. And purchase of ITT’s stake is likely to cost at least $600 million, as ITT and Cablevision paid just over $1 billion to buy the Garden from Viacom in 1994.

Cablevision execs did not directly tie the cable sales to its plans for the Garden, analysts who were on the call said. But Cablevision execs did say the money raised from the sale could be used to strengthen “existing clusters,” which could be interpreted to mean the Garden business.

In a statement Wednesday, Cablevision CEO James Dolan said Cablevision has “several options available to us, as well as a commitment for financing, making us comfortable that such a purchase will present no issues for us.” A Cablevision spokesman declined further comment, including on the comments made on the analyst call.

Wall Street sources say Cablevision could choose to buy the other half in a partnership with another company, such as NBC or News Corp’s Fox. News execs are looking at making a bid for ITT’s half, anxious to add an interest in MSG to the network of regional sports channels owned by a joint venture of Fox and Liberty Media.

That could make News willing to put up the cash to get a partial interest in the Garden. But Cablevision chairman Chuck Dolan rejected an opportunity to join the Fox/Liberty sports joint venture when it was put together last year, so he is unlikely to join forces with them now.